Barclays Plc (BARC), Britain’s second- biggest lender, pledged to reduce pay levels as it tries to fend off an investor revolt over executive compensation.
“The balance of rewards between shareholders and employees has to change in favor of shareholders,” Alison Carnwath, chairman of the bank’s remuneration committee, said at the lender’s annual investor meeting in London today. “We will continue to seek to push down remuneration levels in the context of the competitive environment.”
Investors are preparing vote on Barclays’s executive compensation plan at today’s meeting after Pensions Investment Research Consultants Ltd., the U.K. corporate governance advisers urged investors to oppose it. PIRC said the lender had provided “rewards for failure.” because the bank’s return on equity was below its cost of equity.
Chief Executive Officer Robert Diamond and Finance Director Chris Lucas last week agreed to cut their deferred bonuses for 2011 until the bank improves profitability in an effort appease investors opposed to the scale of their pay. The concession, equal to about 11 percent of Diamond’s 12 million-pound ($19 million) compensation for last year comes after Citigroup Inc. investors rejected the bank’s pay plans.
Barclays gained 4.55 percent to 222.55 pence at 11:55 a.m. in London, valuing the bank at 27 billion pounds.
“It mystifies me, the amounts of these bonuses being bandied around,” Peter Brown, 78, a shareholder and former employee of the bank’s consumer division, said at the meeting. “Performance is meant to be the determinant of bonuses and I’m not sure it is.”
Barclays said in February it may fail to hit its 13 percent target for ROE by 2013 after it fell to 6.6 percent in 2011. The bank’s cost of equity was 11.5 percent for 2011.
Chairman Marcus Agius today apologized for failing to communicate the firm’s executive pay plans more clearly. The debate over remuneration has caused “reputational damage,” he said.
“We have not done a good enough job in articulating our case: on some matters we should have communicated earlier and more clearly,” Agius said. “For this I apologize and I assure you that in the future we will be engaging differently and more purposefully with shareholders.”
The bank has “very talented people we have to reward,” said Agius. “It is not an option to pay zero bonus unilaterally.”
Barclays cut total incentive rewards by 26 percent in 2011 and reduced bonuses for executive directors and its eight highest-paid senior employees by 48 percent, Carnwath said today. Barclays’s pretax profit fell by 3 percent in the same period, she added.
“Whilst we believe in good faith that we got our decisions and judgments broadly right for 2011, it is clear that this view is not shared by all shareholders,” Carnwath said. “We made progress on this journey in 2011 but recognize that we still have further to go.”
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